2023 Half-Year Results - Part 2 of 2

Companies

Lloyds Banking Group (LLOY)

UK 100

Latest directors dealings

2 days ago City of London Investment Group
2 days ago Aberdeen Group plc
2 days ago NATWEST GROUP
2 days ago Ondo Insurtech
2 days ago Banco Santander S.A.

All directors dealings today

Condensed consolidated half-year financial statements (unaudited)
Consolidated income statement		64
Consolidated statement of comprehensive income		65
Consolidated balance sheet		66
Consolidated statement of changes in equity		68
Consolidated cash flow statement		71

Notes
1	Basis of preparation and accounting policies	72
2	Critical accounting judgements and key sources of estimation uncertainty	74
3	Segmental analysis	75
4	Net fee and commission income	78
5	Insurance revenue	78
6	Insurance service expense	80
7	Net investment return on assets held to back insurance contracts and participating investment contracts and net finance (expense) income	81
8	Operating expenses	82
9	Impairment	83
10	Tax expense	84
11	Earnings per share	84
12	Fair values of financial assets and liabilities	85
13	Derivative financial instruments	91
14	Loans and advances to customers	92
15	Credit quality of loans and advances to customers	94
16	Allowance for expected credit losses	98
17	Debt securities in issue	107
18	Measurement components of insurance contracts and participating investment contracts	108
19	Retirement benefit obligations	109
20	Other provisions	110
21	Contingent liabilities, commitments and guarantees	111
22	Interest rate benchmark reform	113
23	Dividends on ordinary shares and share buyback	113
24	Implementation of IFRS 17 Insurance contracts	114
25	Impact on balance sheet as at 1 January 2022	118
26	Other information	120

	Note	Half-year to 30 Jun 2023 £m	Half-year to 30 Jun 2022¹ £m	Half-year to 31 Dec 2022¹ £m

Interest income		13,048	7,429	10,216
Interest expense		(6,250)	(1,392)	(3,331)
Net interest income		6,798	6,037	6,885
Fee and commission income		1,426	1,370	1,420
Fee and commission expense		(539)	(521)	(549)
Net fee and commission income	4	887	849	871
Net trading income (losses)		6,161	(19,302)	(685)
Insurance revenue	5	1,450	1,201	1,260
Insurance service expense	6	(1,238)	(1,447)	(2,416)
Net income (losses) from reinsurance contracts held		11	(6)	68
Insurance service result		223	(252)	(1,088)
Other operating income		826	675	664
Other income		8,097	(18,030)	(238)
Total income		14,895	(11,993)	6,647
Net finance (expense) income from insurance, participating investment and reinsurance contracts	7	(3,769)	14,300	1,593
Movement in third party interests in consolidated funds		(332)	1,163	(128)
Change in non-participating investment contracts		(1,488)	4,478	(519)
Total income, after net finance (expense) income in respect of insurance and investment contracts		9,306	7,948	7,593
Operating expenses	8	(4,774)	(4,418)	(4,819)
Impairment	9	(662)	(381)	(1,141)
Profit before tax		3,870	3,149	1,633
Tax expense	10	(1,006)	(702)	(157)
Profit for the period		2,864	2,447	1,476

Profit attributable to ordinary shareholders		2,572	2,190	1,199
Profit attributable to other equity holders		255	214	224
Profit attributable to equity holders		2,827	2,404	1,423
Profit attributable to non-controlling interests		37	43	53
Profit for the period		2,864	2,447	1,476

Basic earnings per share	11	3.9p	3.1p	1.8p
Diluted earnings per share	11	3.8p	3.1p	1.8p

	Half-year to 30 Jun 2023 £m	Half-year to 30 Jun 2022¹ £m	Half-year to 31 Dec 2022¹ £m

Profit for the period	2,864	2,447	1,476
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax	(119)	(382)	(2,630)
Tax	27	175	685
	(92)	(207)	(1,945)
Movements in revaluation reserve in respect of equity shares held at fair value through other comprehensive income:
Change in fair value	(48)	33	11
Tax	-	(1)	4
	(48)	32	15
Gains and losses attributable to own credit risk:
(Losses) gains before tax	(85)	421	98
Tax	24	(127)	(28)
	(61)	294	70
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair value through other comprehensive income:
Change in fair value	157	(27)	(106)
Income statement transfers in respect of disposals	(107)	(45)	(47)
Income statement transfers in respect of impairment	(2)	-	6
Tax	(13)	25	37
	35	(47)	(110)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income	(1,644)	(3,553)	(3,437)
Net income statement transfers	756	(186)	229
Tax	244	1,011	917
	(644)	(2,728)	(2,291)
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil)	(66)	46	70
Transfers to income statement (tax: £nil)	-	-	(31)
	(66)	46	39
Total other comprehensive loss for the period, net of tax	(876)	(2,610)	(4,222)
Total comprehensive income (loss) for the period	1,988	(163)	(2,746)

Total comprehensive income (loss) attributable to ordinary shareholders	1,696	(420)	(3,023)
Total comprehensive income attributable to other equity holders	255	214	224
Total comprehensive income (loss) attributable to equity holders	1,951	(206)	(2,799)
Total comprehensive income attributable to non-controlling interests	37	43	53
Total comprehensive income (loss) for the period	1,988	(163)	(2,746)

	Note	At 30 Jun 2023 £m		At 31 Dec 2022¹ £m

Assets
Cash and balances at central banks			95,522	91,388
Financial assets at fair value through profit or loss			191,525	180,769
Derivative financial instruments	13		23,670	24,753
Loans and advances to banks			11,333	10,632
Loans and advances to customers	14		450,720	454,899
Reverse repurchase agreements			36,006	44,865
Debt securities			12,849	9,926
Financial assets at amortised cost			510,908	520,322
Financial assets at fair value through other comprehensive income			22,232	23,154
Goodwill and other intangible assets			8,203	7,615
Current tax recoverable			970	612
Deferred tax assets			6,210	6,422
Retirement benefit assets	19		4,685	3,823
Other assets			18,879	14,536
Total assets			882,804	873,394

	Note	At 30 Jun 2023 £m		At 31 Dec 2022¹ £m

Liabilities
Deposits from banks			6,222	7,266
Customer deposits			469,813	475,331
Repurchase agreements at amortised cost			44,622	48,596
Financial liabilities at fair value through profit or loss			23,777	17,755
Derivative financial instruments	13		23,662	24,042
Notes in circulation			1,342	1,280
Debt securities in issue	17		79,264	73,819
Liabilities arising from insurance contracts and participating investment contracts			113,566	110,278
Liabilities arising from non-participating investment contracts			41,943	39,476
Other liabilities			22,303	18,764
Retirement benefit obligations	19		120	126
Current tax liabilities			25	8
Deferred tax liabilities			181	209
Other provisions	20		1,625	1,803
Subordinated liabilities			9,857	10,730
Total liabilities			838,322	829,483

Equity
Share capital			6,464	6,729
Share premium account			18,557	18,504
Other reserves			6,191	6,587
Retained profits			6,079	6,550
Ordinary shareholders' equity			37,291	38,370
Other equity instruments			6,940	5,297
Total equity excluding non-controlling interests			44,231	43,667
Non-controlling interests			251	244
Total equity			44,482	43,911
Total equity and liabilities			882,804	873,394

	Attributable to ordinary shareholders
	Share capital and premium £m	Other reserves £m	Retained profits £m	Total £m	Other equity instruments £m		Non- controlling interests £m		Total £m

At 31 December 2022	25,233	6,602	10,145	41,980		5,297		244	47,521
Adjustment on adoption of IFRS 17	-	(15)	(3,595)	(3,610)		-		-	(3,610)
At 1 January 2023	25,233	6,587	6,550	38,370		5,297		244	43,911
Comprehensive income
Profit for the period	-	-	2,572	2,572		255		37	2,864
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax	-	-	(92)	(92)		-		-	(92)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities	-	35	-	35		-		-	35
Equity shares	-	(48)	-	(48)		-		-	(48)
Gains and losses attributable to own credit risk, net of tax	-	-	(61)	(61)		-		-	(61)
Movements in cash flow hedging reserve, net of tax	-	(644)	-	(644)		-		-	(644)
Movements in foreign currency translation reserve, net of tax	-	(66)	-	(66)		-		-	(66)
Total other comprehensive income	-	(723)	(153)	(876)		-		-	(876)
Total comprehensive income¹	-	(723)	2,419	1,696		255		37	1,988
Transactions with owners
Dividends	-	-	(1,059)	(1,059)		-		(30)	(1,089)
Distributions on other equity instruments	-	-	-	-		(255)		-	(255)
Issue of ordinary shares	115	-	-	115		-		-	115
Share buyback	(327)	327	(2,020)	(2,020)		-		-	(2,020)
Issue of other equity instruments	-	-	(6)	(6)		1,778		-	1,772
Repurchases and redemptions of other equity instruments	-	-	-	-		(135)		-	(135)
Movement in treasury shares	-	-	101	101		-		-	101
Value of employee services:
Share option schemes	-	-	23	23		-		-	23
Other employee award schemes	-	-	71	71		-		-	71
Changes in non-controlling interests	-	-	-	-		-		-	-
Total transactions with owners	(212)	327	(2,890)	(2,775)		1,388		(30)	(1,417)
Realised gains and losses on equity shares held at fair value through other comprehensive income	-	-	-	-		-		-	-
At 30 June 2023²	25,021	6,191	6,079	37,291		6,940		251	44,482

		CSM at transition date
Year contracts initially recognised	Transition approach	£m	%

Contracts initially recognised prior to 1 January 2016	Fair value approach	1,419	74
Contracts initially recognised after 1 January 2016	Full retrospective approach	508	26
		1,927	100

Half-year to 30 June 2023	Net interest income £m	Other income, after net finance income¹ £m	Total income, after net finance income^1,2 £m	Profit before tax £m	External income £m	Inter- segment income (expense) £m

Underlying basis
Retail	5,064	1,006	6,070	2,505	6,429	(359)
Commercial Banking	1,934	856	2,790	1,417	2,296	494
Insurance, Pensions and Investments	(70)	619	549	91	621	(72)
Other	76	57	133	28	196	(63)
Group	7,004	2,538	9,542	4,041	9,542	-
Reconciling items:
Insurance grossing adjustment	7	(139)	(132)	-
Market volatility and asset sales	(183)	117	(66)	(63)
Amortisation of purchased intangibles	-	-	-	(35)
Restructuring costs³	-	-	-	(25)
Fair value unwind and other items	(30)	(8)	(38)	(48)
Group - statutory	6,798	2,508	9,306	3,870

Half-year to 30 June 2022¹	Net interest income £m	Other income, after net finance income² £m	Total income, after net finance income^2,3 £m	Profit before tax £m	External income £m	Inter- segment income (expense) £m

Underlying basis
Retail	4,628	854	5,482	2,320	5,733	(251)
Commercial Banking	1,520	731	2,251	904	2,077	174
Insurance, Pensions and Investments	(43)	533	490	35	503	(13)
Other	30	249	279	403	189	90
Group	6,135	2,367	8,502	3,662	8,502	-
Reconciling items:
Insurance grossing adjustment	(24)	(105)	(129)	-
Market volatility and asset sales	(12)	(352)	(364)	(359)
Amortisation of purchased intangibles	-	-	-	(35)
Restructuring costs⁴	-	-	-	(47)
Fair value unwind and other items	(62)	1	(61)	(72)
Group - statutory	6,037	1,911	7,948	3,149

Half-year to 31 December 2022¹	Net interest income £m	Other income, after net finance income² £m	Total income, after net finance income^2,3 £m	Profit before tax £m	External income £m	Inter- segment income (expense) £m

Underlying basis
Retail	5,146	877	6,023	2,177	6,322	(299)
Commercial Banking	1,927	834	2,761	957	2,253	508
Insurance, Pensions and Investments	(58)	427	369	(97)	407	(38)
Other	22	161	183	329	354	(171)
Group	7,037	2,299	9,336	3,366	9,336	-
Reconciling items:
Insurance grossing adjustment	-	(96)	(96)	-
Market volatility and asset sales	(123)	(1,489)	(1,612)	(1,619)
Amortisation of purchased intangibles	-	-	-	(35)
Restructuring costs⁴	-	-	-	(33)
Fair value unwind and other items	(29)	(6)	(35)	(46)
Group - statutory	6,885	708	7,593	1,633

	Segment external assets		Segment customer deposits		Segment external liabilities
	At 30 Jun 2023 £m	At 31 Dec 2022¹ £m	At 30 Jun 2023 £m	At 31 Dec 2022 £m	At 30 Jun 2023 £m	At 31 Dec 2022¹ £m

Retail	372,926	372,485	305,887	310,765	310,501	314,091
Commercial Banking	155,267	147,477	163,580	163,828	210,147	202,070
Insurance, Pensions and Investments	173,647	170,777	-	-	169,088	168,357
Other	180,964	182,655	346	738	148,586	144,965
Total Group	882,804	873,394	469,813	475,331	838,322	829,483

	Half-year to 30 Jun 2023 £m	Half-year to 30 Jun 2022 £m	Half-year to 31 Dec 2022 £m

Life
Amounts relating to the changes in liabilities for remaining coverage:
CSM recognised for services provided	160	100	145
Change in risk adjustments for non-financial risk for risk expired	30	54	49
Expected incurred claims and other insurance services expenses	955	877	819
Charges (credits) to funds in respect of policyholder tax and other	20	(162)	(66)
Recovery of insurance acquisition cash flows	40	38	48
Total life	1,205	907	995

Non-life
Total non-life	245	294	265
Total insurance revenue	1,450	1,201	1,260

	Half-year to 30 June 2023
	Life £m	Non-life £m	Total £m

Incurred claims and other directly attributable expenses	966	236	1,202
Changes that relate to past service: adjustment to liabilities for incurred claims	1	(45)	(44)
Changes that relate to future service: losses and reversal of losses on onerous contracts	26	(4)	22
Amortisation of insurance acquisition assets	40	18	58
Net impairment loss on insurance acquisition assets	-	-	-
Total insurance service expense	1,033	205	1,238

	Half-year to 30 June 2022
	Life £m	Non-life £m	Total £m

Incurred claims and other directly attributable expenses	896	239	1,135
Changes that relate to past service: adjustment to liabilities for incurred claims	4	(16)	(12)
Changes that relate to future service: losses and reversal of losses on onerous contracts¹	265	1	266
Amortisation of insurance acquisition assets	37	21	58
Net impairment loss on insurance acquisition assets	-	-	-
Total insurance service expense	1,202	245	1,447

	Half-year to 31 December 2022
	Life £m	Non-life £m	Total £m

Incurred claims and other directly attributable expenses	855	236	1,091
Changes that relate to past service: adjustment to liabilities for incurred claims	(4)	73	69
Changes that relate to future service: losses and reversal of losses on onerous contracts¹	1,221	1	1,222
Amortisation of insurance acquisition assets	48	(28)	20
Net impairment loss on insurance acquisition assets	14	-	14
Total insurance service expense	2,134	282	2,416

	Half-year to 30 Jun 2023 million	Half-year to 30 Jun 2022 million	Half-year to 31 Dec 2022 million

Weighted-average number of ordinary shares in issue - basic	66,226	70,192	67,524
Adjustment for share options and awards	882	881	790
Weighted-average number of ordinary shares in issue - diluted	67,108	71,073	68,314

Basic earnings per share¹	3.9p	3.1p	1.8p
Diluted earnings per share¹	3.8p	3.1p	1.8p

Financial assets	Level 1 £m	Level 2 £m	Level 3 £m	Total £m

At 30 June 2023
Financial assets at fair value through profit or loss:
Loans and advances to banks	-	3,010	-	3,010
Loans and advances to customers	-	2,291	7,641	9,932
Reverse repurchase agreements	-	16,091	-	16,091
Debt securities	11,183	26,703	2,102	39,988
Treasury and other bills	-	-	-	-
Contracts held with reinsurers	-	11,292	-	11,292
Equity shares	109,541	-	1,671	111,212
Total financial assets at fair value through profit or loss¹	120,724	59,387	11,414	191,525
Financial assets at fair value through other comprehensive income:
Debt securities	10,846	11,094	57	21,997
Equity shares	-	-	235	235
Total financial assets at fair value through other comprehensive income	10,846	11,094	292	22,232
Derivative financial instruments	51	23,112	507	23,670
Total financial assets carried at fair value	131,621	93,593	12,213	237,427

	Half-year to 30 Jun 2023 £m	Half-year to 30 Jun 2022¹ £m	Half-year to 31 Dec 2022¹ £m

Staff costs:
Salaries and social security costs	1,695	1,631	1,679
Pensions and other post-retirement benefit schemes (note 19)	153	235	220
Restructuring and other staff costs	185	154	153
	2,033	2,020	2,052
Premises and equipment costs²	179	140	192
Other expenses:
UK bank levy	-	-	148
Regulatory and legal provisions (note 20)	70	79	176
Other	1,448	1,232	1,324
	1,518	1,311	1,648
Depreciation and amortisation	1,333	1,210	1,186
Operating expenses before adjustment for:	5,063	4,681	5,078
Amounts attributable to the acquisition of insurance and participating investment contracts	(82)	(80)	(88)
Amounts reported within insurance service expenses	(207)	(183)	(171)
Total operating expenses	4,774	4,418	4,819

	Gross carrying amount								Allowance for expected credit losses
Stage 1 £m		Stage 2 £m		Stage 3 £m		POCI £m	Total £m	Stage 1 £m		Stage 2 £m		Stage 3 £m		POCI £m	Total £m

At 1 January 2023	380,991		61,164		7,640	9,622	459,417		700		1,808		1,757	253	4,518
Exchange and other adjustments¹	(1,740)		(16)		(2)	(3)	(1,761)		(1)		(1)		59	19	76
Transfers to Stage 1	13,503		(13,489)		(14)		-		281		(276)		(5)		-
Transfers to Stage 2	(18,824)		19,325		(501)		-		(59)		119		(60)		-
Transfers to Stage 3	(456)		(1,635)		2,091		-		(7)		(171)		178		-
Impact of transfers between stages	(5,777)		4,201		1,576		-		(195)		421		201		427
									20		93		314		427
Other changes in credit quality²									23		(12)		302	74	387
Additions and repayments	5,245		(3,100)		(767)	(527)	851		37		(89)		(58)	(37)	(147)
Charge (credit) to the income statement									80		(8)		558	37	667
Disposals and derecognition³	(1,202)		(547)		(94)	(743)	(2,586)		(1)		(18)		(7)	(34)	(60)
Advances written off					(554)	-	(554)						(554)	-	(554)
Recoveries of advances written off in previous years					90	-	90						90	-	90
At 30 June 2023	377,517		61,702		7,889	8,349	455,457		778		1,781		1,903	275	4,737
Allowance for impairment losses	(778)		(1,781)		(1,903)	(275)	(4,737)
Net carrying amount	376,739		59,921		5,986	8,074	450,720
Drawn ECL coverage⁴	0.2%		2.9%		24.1%	3.3%	1.0%

	Gross carrying amount					Allowance for expected credit losses
	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

At 1 January 2022	400,036	34,931	6,443	10,977	452,387	915	1,114	1,581	210	3,820
Exchange and other adjustments¹	(393)	15	(23)	12	(389)	2	-	39	65	106
Transfers to Stage 1	8,330	(8,257)	(73)		-	176	(167)	(9)		-
Transfers to Stage 2	(35,046)	35,448	(402)		-	(66)	135	(69)		-
Transfers to Stage 3	(1,250)	(2,528)	3,778		-	(8)	(158)	166		-
Impact of transfers between stages	(27,966)	24,663	3,303		-	(120)	701	268		849
						(18)	511	356		849
Other changes in credit quality²						(309)	85	618	49	443
Additions and repayments	9,314	1,555	(1,337)	(1,354)	8,178	110	98	(91)	(58)	59
(Credit) charge to the income statement						(217)	694	883	(9)	1,351
Advances written off			(928)	(13)	(941)			(928)	(13)	(941)
Recoveries of advances written off in previous years			182	-	182			182	-	182
At 31 December 2022	380,991	61,164	7,640	9,622	459,417	700	1,808	1,757	253	4,518
Allowance for impairment losses	(700)	(1,808)	(1,757)	(253)	(4,518)
Net carrying amount	380,291	59,356	5,883	9,369	454,899
Drawn ECL coverage³	0.2%	3.0%	23.0%	2.6%	1.0%

		Gross drawn exposures								Expected credit loss allowance
At 30 June 2023	Stage 1 £m		Stage 2 £m		Stage 3 £m		POCI £m	Total £m	Stage 1 £m		Stage 2 £m		Stage 3 £m		POCI £m	Total £m

Retail - UK mortgages
RMS 1-3		241,410		19,656		-	-	261,066		96		116		-	-	212
RMS 4-6		9,504		18,865		-	-	28,369		20		189		-	-	209
RMS 7-9		99		1,863		-	-	1,962		-		47		-	-	47
RMS 10		-		940		-	-	940		-		40		-	-	40
RMS 11-13		-		3,319		-	-	3,319		-		180		-	-	180
RMS 14		-		-		3,766	8,349	12,115		-		-		366	275	641
		251,013		44,643		3,766	8,349	307,771		116		572		366	275	1,329

Retail - credit cards
RMS 1-3		3,691		3		-	-	3,694		7		-		-	-	7
RMS 4-6		6,941		1,309		-	-	8,250		71		63		-	-	134
RMS 7-9		1,571		1,151		-	-	2,722		55		150		-	-	205
RMS 10		7		234		-	-	241		1		53		-	-	54
RMS 11-13		-		369		-	-	369		-		148		-	-	148
RMS 14		-		-		302	-	302		-		-		123	-	123
		12,210		3,066		302	-	15,578		134		414		123	-	671

Retail - loans and overdrafts
RMS 1-3		657		1		-	-	658		2		-		-	-	2
RMS 4-6		6,268		378		-	-	6,646		93		32		-	-	125
RMS 7-9		2,042		544		-	-	2,586		79		70		-	-	149
RMS 10		80		188		-	-	268		7		41		-	-	48
RMS 11-13		28		424		-	-	452		5		165		-	-	170
RMS 14		-		-		242	-	242		-		-		128	-	128
		9,075		1,535		242	-	10,852		186		308		128	-	622

Retail - UK Motor Finance
RMS 1-3		9,488		752		-	-	10,240		84		11		-	-	95
RMS 4-6		2,835		974		-	-	3,809		31		20		-	-	51
RMS 7-9		512		275		-	-	787		3		10		-	-	13
RMS 10		-		60		-	-	60		-		5		-	-	5
RMS 11-13		1		165		-	-	166		-		25		-	-	25
RMS 14		-		-		122	-	122		-		-		60	-	60
		12,836		2,226		122	-	15,184		118		71		60	-	249

Retail - other

Financial liabilities	Level 1 £m	Level 2 £m	Level 3 £m	Total £m

At 30 June 2023
Financial liabilities at fair value through profit or loss:
Debt securities in issue	-	4,908	46	4,954
Repurchase agreements	-	17,147	-	17,147
Short position in securities	1,648	7	-	1,655
Other	-	21	-	21
Total financial liabilities at fair value through profit or loss	1,648	22,083	46	23,777
Derivative financial instruments	101	23,023	538	23,662
Liabilities arising from non-participating investment contracts	-	41,943	-	41,943
Total financial liabilities carried at fair value	1,749	87,049	584	89,382

At 31 December 2022¹
Financial liabilities at fair value through profit or loss:
Debt securities in issue	-	5,114	45	5,159
Repurchase agreements	-	11,037	-	11,037
Short position in securities	1,505	35	-	1,540
Other	-	19	-	19
Total financial liabilities at fair value through profit or loss	1,505	16,205	45	17,755
Derivative financial instruments	39	23,395	608	24,042
Liabilities arising from non-participating investment contracts	-	39,476	-	39,476
Total financial liabilities carried at fair value	1,544	79,076	653	81,273

	Financial assets at fair value through profit or loss £m	Financial assets at fair value through other comprehensive income £m		Derivative assets £m	Total financial assets carried at fair value £m

At 1 January 2023	11,304		342	553	12,199
Exchange and other adjustments	(1)		(2)	(13)	(16)
Gains (losses) recognised in the income statement within other income	104		4	(53)	55
Losses recognised in other comprehensive income within the revaluation reserve in respect of financial assets at fair value through other comprehensive income	-		(48)	-	(48)
Purchases/increases to customer loans	347		-	40	387
Sales/repayments of customer loans	(475)		(4)	(17)	(496)
Transfers into the level 3 portfolio	139		-	-	139
Transfers out of the level 3 portfolio	(4)		-	(3)	(7)
At 30 June 2023	11,414		292	507	12,213
Gains (losses) recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2023	79		2	(58)	23

At 1 January 2022	13,313		305	893	14,511
Exchange and other adjustments	15		1	21	37
(Losses) gains recognised in the income statement within other income	(1,140)		-	160	(980)
Gains recognised in other comprehensive income within the revaluation reserve in respect of financial assets at fair value through other comprehensive income	-		32	-	32
Purchases/increases to customer loans	622		-	41	663
Sales/repayments of customer loans	(818)		(4)	(9)	(831)
Transfers into the level 3 portfolio	161		-	-	161
Transfers out of the level 3 portfolio	(45)		-	(486)	(531)
At 30 June 2022	12,108		334	620	13,062
(Losses) gains recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2022	(1,080)		-	254	(826)

	Financial liabilities at fair value through profit or loss £m	Derivative liabilities £m	Total financial liabilities carried at fair value £m

At 1 January 2023	45	608	653
Exchange and other adjustments	-	(8)	(8)
Losses (gains) recognised in the income statement within other income	1	(57)	(56)
Additions	-	31	31
Redemptions	(1)	(36)	(37)
Transfers into the level 3 portfolio	2	-	2
Transfers out of the level 3 portfolio	(1)	-	(1)
At 30 June 2023	46	538	584
Losses (gains) recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2023	1	(58)	(57)

At 1 January 2022	37	944	981
Exchange and other adjustments	-	17	17
Losses recognised in the income statement within other income	8	5	13
Additions	4	37	41
Redemptions	(2)	(13)	(15)
Transfers into the level 3 portfolio	-	-	-
Transfers out of the level 3 portfolio	(3)	(178)	(181)
At 30 June 2022	44	812	856
Losses recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2022	7	33	40

				Effect of reasonably possible alternative assumptions¹
At 30 June 2023	Valuation techniques	Significant unobservable inputs²	Carrying value £m	Favourable changes £m	Unfavourable changes £m

Financial assets at fair value through profit or loss
Loans and advances to customers	Discounted cash flows	Interest rate spreads (-50bps/+272bps)	7,641	325	298
Equity and venture capital investments	Market approach	Earnings multiple (1.9/13.2)	2,195	93	(93)
	Underlying asset/net asset value (incl. property prices)³	n/a	805	80	(106)
Unlisted equities, debt securities and property partnerships in the life funds	Underlying asset/net asset value (incl. property prices), broker quotes or discounted cash flows³	n/a	375	-	14
Other			398	14	(8)
			11,414
Financial assets at fair value through other comprehensive income			292	18	(18)
Derivative financial assets
Interest rate derivatives	Option pricing model	Interest rate volatility (15%/190%)	507	3	(7)
Level 3 financial assets carried at fair value			12,213

Financial liabilities at fair value through profit or loss			46	1	(1)
Derivative financial liabilities
Interest rate derivatives	Option pricing model	Interest rate volatility (15%/190%)	538	9	(13)
Level 3 financial liabilities carried at fair value			584

	At 30 June 2023		At 31 December 2022
	Carrying value £m	Fair value £m	Carrying value £m	Fair value £m

Financial assets
Loans and advances to banks	11,333	11,333	10,632	10,632
Loans and advances to customers	450,720	442,167	454,899	450,071
Reverse repurchase agreements	36,006	36,006	44,865	44,865
Debt securities	12,849	12,355	9,926	9,930
Financial assets at amortised cost	510,908	501,861	520,322	515,498

Financial liabilities
Deposits from banks	6,222	6,225	7,266	7,268
Customer deposits	469,813	469,229	475,331	475,147
Repurchase agreements at amortised cost	44,622	44,622	48,596	48,596
Debt securities in issue	79,264	77,363	73,819	71,975
Subordinated liabilities	9,857	9,424	10,730	10,065

	At 30 June 2023			At 31 December 2022
	Fair value of assets £m	Fair value of liabilities £m		Fair value of assets £m	Fair value of liabilities £m

Trading and other
Exchange rate contracts	5,865		6,424	8,733	9,216
Interest rate contracts	17,107		15,881	14,966	13,332
Credit derivatives	61		87	134	118
Equity and other contracts	605		743	845	849
	23,638		23,135	24,678	23,515
Hedging
Derivatives designated as fair value hedges	1		449	11	503
Derivatives designated as cash flow hedges	31		78	64	24
	32		527	75	527
Total recognised derivative assets/liabilities	23,670		23,662	24,753	24,042

At 30 June 2023	2023 %	2024 %	2025 %	2026 %	2027 %	2023 to 2027 average %

Upside
Gross domestic product	0.8	1.6	0.9	1.5	2.0	1.3
Unemployment rate	3.3	2.7	3.0	3.4	3.3	3.1
House price growth	(3.3)	2.4	7.8	7.5	7.3	4.3
Commercial real estate price growth	2.3	6.5	1.8	2.4	3.8	3.4
UK Bank Rate	5.39	7.00	6.57	5.76	5.63	6.07
CPI inflation	7.9	4.2	3.7	3.3	3.3	4.5

Base case
Gross domestic product	0.2	0.3	0.7	1.5	2.1	0.9
Unemployment rate	4.1	4.7	5.2	5.3	5.0	4.9
House price growth	(5.4)	(3.2)	0.8	2.8	4.8	(0.1)
Commercial real estate price growth	(3.9)	(0.2)	(0.3)	1.2	3.8	0.1
UK Bank Rate	5.06	5.44	4.63	3.69	3.50	4.46
CPI inflation	7.9	4.0	3.0	2.2	2.0	3.8

Downside
Gross domestic product	(0.6)	(1.5)	0.4	1.4	2.1	0.4
Unemployment rate	4.9	7.1	7.7	7.6	7.1	6.9
House price growth	(6.9)	(8.2)	(6.3)	(2.5)	2.2	(4.4)
Commercial real estate price growth	(9.2)	(7.0)	(3.7)	(1.4)	2.2	(3.9)
UK Bank Rate	4.73	3.67	2.37	1.30	1.04	2.62
CPI inflation	7.9	3.8	2.3	0.9	0.4	3.1

Severe downside
Gross domestic product	(1.5)	(2.8)	0.3	1.2	1.8	(0.2)
Unemployment rate	6.1	9.8	10.4	10.1	9.5	9.2
House price growth	(9.3)	(14.6)	(14.3)	(9.1)	(1.8)	(9.9)
Commercial real estate price growth	(17.5)	(16.5)	(9.0)	(6.1)	(0.4)	(10.1)
UK Bank Rate - modelled	4.26	1.73	0.48	0.08	0.04	1.32
UK Bank Rate - adjusted¹	5.69	7.00	4.94	3.88	3.50	5.00
CPI inflation - modelled	7.9	3.5	1.4	(0.5)	(1.3)	2.2
CPI inflation - adjusted¹	9.8	7.4	5.5	4.2	3.9	6.2

Probability-weighted
Gross domestic product	0.0	(0.2)	0.6	1.4	2.0	0.8
Unemployment rate	4.3	5.3	5.8	5.9	5.5	5.4
House price growth	(5.6)	(4.1)	(0.7)	1.4	4.1	(1.1)
Commercial real estate price growth	(5.0)	(1.9)	(1.5)	0.1	2.9	(1.1)
UK Bank Rate - modelled	4.98	5.00	4.12	3.23	3.05	4.08
UK Bank Rate - adjusted¹	5.12	5.53	4.56	3.61	3.40	4.45
CPI inflation - modelled	7.9	4.0	2.8	1.9	1.6	3.6
CPI inflation - adjusted¹	8.1	4.3	3.2	2.3	2.1	4.0

At 31 December 2022	2022 %	2023 %	2024 %	2025 %	2026 %	2022 to 2026 average %

Upside
Gross domestic product	4.1	0.1	1.1	1.7	2.1	1.8
Unemployment rate	3.5	2.8	3.0	3.3	3.4	3.2
House price growth	2.4	(2.8)	6.5	9.0	8.0	4.5
Commercial real estate price growth	(9.4)	8.5	3.5	2.6	2.3	1.3
UK Bank Rate	1.94	4.95	4.98	4.63	4.58	4.22
CPI inflation	9.0	8.3	4.2	3.3	3.0	5.5

Base case
Gross domestic product	4.0	(1.2)	0.5	1.6	2.1	1.4
Unemployment rate	3.7	4.5	5.1	5.3	5.1	4.8
House price growth	2.0	(6.9)	(1.2)	2.9	4.4	0.2
Commercial real estate price growth	(11.8)	(3.3)	0.9	2.8	3.1	(1.8)
UK Bank Rate	1.94	4.00	3.38	3.00	3.00	3.06
CPI inflation	9.0	8.3	3.7	2.3	1.7	5.0

Downside
Gross domestic product	3.9	(3.0)	(0.5)	1.4	2.1	0.8
Unemployment rate	3.8	6.3	7.5	7.6	7.2	6.5
House price growth	1.6	(11.1)	(9.8)	(5.6)	(1.5)	(5.4)
Commercial real estate price growth	(13.9)	(15.0)	(3.7)	0.4	1.4	(6.4)
UK Bank Rate	1.94	2.93	1.39	0.98	1.04	1.65
CPI inflation	9.0	8.2	3.3	1.3	0.3	4.4

Severe downside
Gross domestic product	3.7	(5.2)	(1.0)	1.3	2.1	0.1
Unemployment rate	4.1	9.0	10.7	10.4	9.7	8.8
House price growth	1.1	(14.8)	(18.0)	(11.5)	(4.2)	(9.8)
Commercial real estate price growth	(17.3)	(28.8)	(9.9)	(1.3)	3.2	(11.6)
UK Bank Rate - modelled	1.94	1.41	0.20	0.13	0.14	0.76
UK Bank Rate - adjusted¹	2.44	7.00	4.88	3.31	3.25	4.18
CPI inflation - modelled	9.0	8.2	2.6	(0.1)	(1.6)	3.6
CPI inflation - adjusted¹	9.7	14.3	9.0	4.1	1.6	7.7

Probability-weighted
Gross domestic product	4.0	(1.8)	0.2	1.5	2.1	1.2
Unemployment rate	3.7	5.0	5.8	5.9	5.7	5.2
House price growth	1.9	(7.7)	(3.2)	0.7	2.9	(1.2)
Commercial real estate price growth	(12.3)	(5.8)	(0.8)	1.6	2.3	(3.1)
UK Bank Rate - modelled	1.94	3.70	2.94	2.59	2.60	2.76
UK Bank Rate - adjusted¹	1.99	4.26	3.41	2.91	2.91	3.10
CPI inflation - modelled	9.0	8.3	3.6	2.1	1.4	4.9
CPI inflation - adjusted¹	9.1	8.9	4.3	2.5	1.7	5.3

At 30 June 2023	First quarter 2023 %	Second quarter 2023 %	Third quarter 2023 %	Fourth quarter 2023 %	First quarter 2024 %	Second quarter 2024 %	Third quarter 2024 %	Fourth quarter 2024 %

Gross domestic product	0.1	(0.1)	0.1	(0.1)	0.1	0.1	0.1	0.2
Unemployment rate	3.9	4.0	4.2	4.4	4.5	4.7	4.8	4.9
House price growth	1.6	(2.5)	(6.4)	(5.4)	(9.1)	(9.5)	(6.2)	(3.2)
Commercial real estate price growth	(18.8)	(21.4)	(17.9)	(3.9)	(3.5)	(3.5)	(2.0)	(0.2)
UK Bank Rate	4.25	5.00	5.50	5.50	5.50	5.50	5.50	5.25
CPI inflation	10.2	8.7	7.3	5.3	4.8	3.6	3.8	3.7

At 31 December 2022	First quarter 2022 %	Second quarter 2022 %	Third quarter 2022 %	Fourth quarter 2022 %	First quarter 2023 %	Second quarter 2023 %	Third quarter 2023 %	Fourth quarter 2023 %

Gross domestic product	0.6	0.1	(0.3)	(0.4)	(0.4)	(0.4)	(0.2)	(0.1)
Unemployment rate	3.7	3.8	3.6	3.7	4.0	4.4	4.7	4.9
House price growth	11.1	12.5	9.8	2.0	(3.0)	(8.4)	(9.8)	(6.9)
Commercial real estate price growth	18.0	18.0	8.4	(11.8)	(16.9)	(19.8)	(15.9)	(3.3)
UK Bank Rate	0.75	1.25	2.25	3.50	4.00	4.00	4.00	4.00
CPI inflation	6.2	9.2	10.0	10.7	10.0	8.9	8.0	6.1

At 30 June 2023	Probability- weighted £m		Upside £m	Base case £m	Downside £m	Severe downside £m

UK mortgages		1,331	544	878	1,502	4,535
Credit cards		769	606	731	842	1,155
Other Retail		1,030	921	1,005	1,075	1,294
Commercial Banking		1,943	1,573	1,767	2,124	3,041
Other		44	44	44	45	45
ECL allowance		5,117	3,688	4,425	5,588	10,070

At 31 December 2022
UK mortgages		1,209	514	790	1,434	3,874
Credit cards		763	596	727	828	1,180
Other Retail		1,016	907	992	1,056	1,290
Commercial Banking		1,869	1,459	1,656	2,027	3,261
Other		46	46	46	47	47
ECL allowance		4,903	3,522	4,211	5,392	9,652

	At 30 June 2023			At 31 December 2022
1pp increase in unemployment £m		1pp decrease in unemployment £m		1pp increase in unemployment £m	1pp decrease in unemployment £m

UK mortgages	35		(21)	26	(21)
Credit cards	39		(39)	41	(41)
Other Retail	24		(24)	25	(25)
Commercial Banking	88		(83)	100	(91)
ECL impact	186		(167)	192	(178)

	At 30 June 2023		At 31 December 2022
	10pp increase in HPI	10pp decrease in HPI	10pp increase in HPI	10pp decrease in HPI

ECL impact, £m	(226)	366	(225)	370

					Judgements due to:
At 30 June 2023	Modelled ECL £m	Individually assessed £m		Inflationary and interest rate risk £m		Other¹ £m		Total ECL £m

UK mortgages	1,082		-		86		163	1,331
Credit cards	718		-		100		(49)	769
Other Retail	945		-		56		29	1,030
Commercial Banking	983		1,100		-		(140)	1,943
Other	44		-		-		-	44
Total	3,772		1,100		242		3	5,117

At 31 December 2022
UK mortgages	946		-		49		214	1,209
Credit cards	698		-		93		(28)	763
Other Retail	903		-		53		60	1,016
Commercial Banking	972		1,008		-		(111)	1,869
Other	46		-		-		-	46
Total	3,565		1,008		195		135	4,903

	At 30 June 2023			At 31 December 2022
	At fair value through profit or loss £m	At amortised cost £m	Total £m	At fair value through profit or loss £m	At amortised cost £m	Total £m

Medium-term notes issued	4,929	34,854	39,783	5,133	36,819	41,952
Covered bonds	-	12,529	12,529	-	14,242	14,242
Certificates of deposit issued	-	8,963	8,963	-	7,225	7,225
Securitisation notes	25	3,471	3,496	26	2,780	2,806
Commercial paper	-	19,447	19,447	-	12,753	12,753
	4,954	79,264	84,218	5,159	73,819	78,978

At 30 June 2023	Present value of future cash flows £m	Risk adjustment¹ £m		Contractual service margin² £m		Total £m

Insurance contract assets³	2		-		(2)	-
Liabilities arising from insurance contracts and participating investment contracts⁴	(108,194)		(1,208)		(4,164)	(113,566)
Net liabilities	(108,192)		(1,208)		(4,166)	(113,566)

At 31 December 2022
Insurance contract assets³	-		-		-	-
Liabilities arising from insurance contracts and participating investment contracts⁴	(104,881)		(1,187)		(4,210)	(110,278)
Net liabilities	(104,881)		(1,187)		(4,210)	(110,278)

At 1 January 2022
Insurance contract assets³	149		(53)		(72)	24
Liabilities arising from insurance contracts and participating investment contracts⁴	(121,620)		(1,617)		(1,942)	(125,179)
Net liabilities	(121,471)		(1,670)		(2,014)	(125,155)

	At 30 Jun 2023 £m	At 31 Dec 2022 £m

Defined benefit pension schemes:
Present value of funded obligations	(27,482)	(28,965)
Fair value of scheme assets	32,081	32,697
Net pension scheme asset	4,599	3,732
Other post-retirement schemes	(34)	(35)
Total amounts recognised in the balance sheet	4,565	3,697

Recognised on the balance sheet as:
Retirement benefit assets	4,685	3,823
Retirement benefit obligations	(120)	(126)
Total amounts recognised in the balance sheet	4,565	3,697

	£m

Asset at 1 January 2023	3,697
Income statement charge	37
Employer contributions	950
Remeasurement	(119)
Asset at 30 June 2023	4,565

	At 30 Jun 2023 %	At 31 Dec 2022 %

Discount rate	5.39	4.93
Rate of inflation:
Retail Price Index (RPI)	3.22	3.13
Consumer Price Index (CPI)	2.77	2.69
Rate of salary increases	0.00	0.00
Weighted-average rate of increase for pensions in payment	2.89	2.84

Provisions for financial commitments and guarantees £m		Regulatory and legal provisions £m	Other £m	Total £m

At 1 January 2023¹	323	803	677	1,803
Exchange and other adjustments	(2)	(3)	2	(3)
Provisions applied	-	(111)	(199)	(310)
Charge for the period	1	70	64	135
At 30 June 2023	322	759	544	1,625